Attorney General Lockyer Announces Average Charity Netted 41 Percent From Commercial Fundraising In 2003

(SACRAMENTO) – Attorney General Bill Lockyer today released a report that shows the average charity in 2003 received just over 40 percent of the revenue raised in donation campaigns run by commercial fundraisers, with roughly one-quarter of the campaigns netting nonprofits 15 percent or less.

“Charities need to carefully assess whether employing commercial fundraisers is the wisest, best way to raise money for valuable programs that serve our communities,” said Lockyer. “The average nonprofit’s receipts from these campaigns improved slightly in 2003. Unfortunately, the numbers show that too many charities receive too few dollars from too many commercial fundraising efforts.”

The Attorney General’s “Summary of Results of Charitable Solicitation by Commercial Fundraisers,” and a supplemental solicitation report on thrift store and vehicle donation programs, are available online at www.ag.ca.gov/charities . The Attorney General’s Office today also published a new booklet on charitable solicitation that provides donors tips on how to make informed contribution decisions. The guide is available online at www.ag.ca.gov/charities . In addition, Lockyer on July 27 will post at the same web site address an updated “Guide for Charities.” This document provides information on how to form and operate nonprofits, and about state and federal laws that govern nonprofits and solicitation.

Both the number of commercial fundraising campaigns and total revenue they produced increased in 2003 compared to 2002, according to the annual solicitation summary. In 2003, 605 campaigns grossed $233.17 million, up from the $211.30 million raised by 573 campaigns in 2002. The total net proceeds to charities, however, declined as a percentage of gross revenue. In 2003, charities received $100.02 million of the $233.17 million, or 42.9 percent. In 2002, by comparison, charities netted 46.7 percent, or $98.79 million of the $211.30 million raised.

The average commercial fundraising campaign in 2003 provided the charity 41.02 percent of total revenue, according to the summary. This 2003 number represented a fairly significant improvement over the 2002 figure of 38.14 percent.

To avoid distortion by a few campaigns, the average percent to charity is calculated by taking the percentage of contributions returned to the charity for each campaign, adding the individual percentages together, then dividing that figure by the total number of campaigns.

While the 2003 summary of results shows the average commercial fundraising campaign raised more for charities, the report also contains less heartening numbers. In 2003, charities received 15 percent or less of the total revenue from 146 of the 605 campaigns, or 24.1 percent. The percentage of low-yielding campaigns remained virtually unchanged from 2002, when 24.4 percent (140) of the 573 campaigns netted the charity 15 percent or less.

Further, only 223 of the 2003 campaigns, or 36.8 percent, provided more than 50 percent of the revenue to the charity. That’s less than a one percentage point increase from 2002, when 206 of the 573 campaigns, or 35.9 percent, netted the charity more than half the revenue. Lockyer said he had hoped for more improvement in this number, noting that the 35.9 percent figure in 2002 represented an 11.6 percentage-point jump over 2001.

The Better Business Bureau's Wise Giving Alliance recommends that charities net 65 percent of the revenue raised from commercial fundraising campaigns. Of the 605 campaigns in California in 2003, only 148 (less than a quarter) met that standard.

Lockyer today also issued the 2003 “Supplemental Report: Donations of Personal Property,” which details how much charities received from thrift stores that sell donated goods, and from vehicle donation campaigns run by commercial fundraisers.

Vehicle donation campaigns produced $45.54 million in gross revenue in 2003, according to the supplemental report, compared to $45.69 million in 2002. The average vehicle donation campaign in 2003 netted the charity 45.19 percent. That continued a promising trend that saw the average net to charity from vehicle donation campaigns rise almost nine percentage points from 2001 to 2003, from 36.76 percent to 45.19 percent.

For-profit thrift stores that resell goods they purchase from charities at negotiated prices reported total revenue of $74.26 million in 2003, an increase of 184.12 percent from the 2002 figure of $26.14 million. Unfortunately, the average amount paid to charities by these stores declined from 15.69 percent to 13.92 percent of the stores’ total revenue.

Lockyer noted the fundraising reports use information from unedited financial statements filed by charities and fundraisers. The financial statements contain more detailed information about the filers, and can be viewed at the Attorney General’s web site, www.ag.ca.gov/charities . The 2003 statements filed by commercial fundraisers will be available on the web site within weeks. Most of the 91,000 charities registered with the Attorney General’s Office solicit donations directly, and do not use commercial fundraisers.

A comprehensive reform law sponsored by Lockyer, which took effect January 1, 2005, includes provisions to protect charities that deal with for-profit solicitors. The Nonprofit Integrity Act requires commercial fundraisers, within five days of receiving donations, to deposit the funds in a bank account controlled by the charity, or give the money directly to the charity. The Act also requires written contracts between charities and commercial fundraisers for each solicitation campaign, and mandates that the contracts include specific protections and rights for nonprofits.